Dive Brief:
- As Grove Collaborative handles shareholder calls to go private, its second quarter revenue declined 15.5% year over year to $44 million, according to a company press release Thursday.
- Net loss improved to $3.6 million from $10.1 million the year before, mainly due to lower interest and operating expenses. The household and personal care products company reported operating expenses decreased 20.3% to $27.9 million and gross margin for the quarter reached 55.4%.
- Grove’s total direct-to-consumer orders declined 12.6% to 640,000 and DTC active customers dropped nearly 11% to 664,000. The company mostly maintained its full-year outlook of mid-single-digit to low double-digit revenue drop, which was revised while providing Q1 earnings in May.
Dive Insight:
Grove’s Q2 revenue fall comes about a month after receiving a letter to the board from HumanCo Investments, a company shareholder calling for a review of strategic alternatives.
“We share HumanCo’s view that Grove is significantly undervalued in the public markets and that our brand, platform and customer relationships represent strategic assets that would be extremely difficult to replicate” Grove CEO Jeff Yurcisin said on a Thursday call with analysts.
In its board letter, HCI pushed for a potential “sale to a larger strategic company or financial sponsor, or a transformative merger with a profitable company.” The group, which says it’s associated with investors that own more than 5% of Grove’s common shares, believes Grove has untapped potential and is undervalued in the public market with a lack of investor relevance.
Yurcisin told analysts on the call that Grove has agreed to create a working group that includes members of HCI in order to evaluate strategic options.
Contributing to some of Grove’s Q2 revenue decline were disruptions from an e-commerce platform migration that started in March.
“This move enabled more flexibility and efficiency going forward, but created some short-term operational friction that extended into the second quarter” Yurcisin noted on the call. “We believe the largest known issues were resolved by the end of the second quarter and beginning of the third quarter, but we continue to monitor potential ongoing impacts to ensure we’re optimizing the experience and taking full advantage of the opportunity to scale.”
Adding the Grove’s obstacles is its effort to regain compliance with the New York Stock Exchange. In May, Grove received a notice of non-compliance from the NYSE noting the requirement of an average global market capitalization of no less than “$50 million over a consecutive 30 trading-day period and stockholders’ equity of not less than $50 million,” per a press release at the time.
Grove’s interim CFO Tom Siragusa told analysts on the call that the NYSE has since accepted a submitted compliance plan, giving it 18 months to regain compliance.
This is not Grove’s first encounter with warning notices from the NYSE. The company in 2022 received a delisting notice after it was no longer in compliance with the minimum average share price.